Chesapeake Shares Fall On JV, Deal, Despite Solid Profits

Lazard issued caution on Chesapeake Energy shares Friday in light of continued aggressive spending on new natural gas projects.

Chesapeake (CHK) shares fell Friday on news of a new joint venture and expensive preferred stock deal with a 7% yield. The energy company has been selling assets and creating partnerships to fund production, buy new positions and manage its debt. Its efforts of late have been focused on the Utica Shale, an Ohio gas play where Chesapeake’s first wells have been successful.

Despite earnings that beat analyst expectations, announced late Thursday, shares slid by $1.97, or nearly 7% Friday,to $27.06.

Lazard Analyst Drew Venker thinks Chesapeake is expensive at 10.2 times estimated 2012 earnings before interest, taxes, depreciation and amortization (Ebitda), presuming $80 per barrel of oil and $4.00 per million cubic feet of natural gas. That compares to large-cap competitors’ multiples of about 6 times.

Venker, who is Neutral on the stock, thinks Chesapeake’s guidance on expenses is too low, and that it could outspend cash flow.

The Wall Street Journal‘s Liam Denning has more on “Chesapeake’s Puzzling Problem.”